Lebanon

About Lebanon

Lebanon defaulted on 1.2 billion in Eurobond payments in March 2020, its first sovereign default. Lebanon had one of the highest debt to GDP ratios in the world at 170 percent. The banking sector had lent heavily to the government. The financial system was a Ponzi scheme, using new deposits to pay interest on existing debt. The Lebanese pound lost 95 percent of its value. Banks imposed informal capital controls, preventing depositors from accessing savings. The Beirut port explosion in August 2020 compounded the crisis. Poverty rates exceeded 70 percent. Negotiations with the IMF stalled repeatedly. Lebanons political elite, dominated by Hezbollah and sectarian warlords, resisted reforms. The case demonstrates how sovereign default can be prolonged by political dysfunction.